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Korea Inflation September 2019

Korea: Consumer prices year-on-year fall for the first time on record in September

Consumer prices increased 0.4% over the prior month in September, up from August’s 0.2% rise. Higher prices for food and non-alcoholic beverages; and housing and utilities were chiefly behind September’s uptick.

Year-on-year consumer prices fell 0.4% in September, down from August’s flat reading, consequently moving further below the Bank of Korea’s 2.0% target rate and marked the first negative reading since current records began. That said, a base effect due to higher prices for farm products and oil this time last year did exaggerate the headline figure, as core inflation—which excludes fresh food and energy prices—edged down to 0.5% from 0.8% in August. Meanwhile, annual average inflation inched down to 0.8% from August’s 1.0%. Overall, weak price pressures can be attributed in part to tepid economic activity, and should provide the Central Bank enough reason to carry out a rate cut in Q4 2019.

Commenting on September’s print, analysts at Goldman Sachs, noted:

“We continue to believe low inflationary pressures will allow the BOK to keep an accommodative monetary policy stance for a prolonged period. The pace of future easing will likely be gradual in our view, with one 25bp rate cut in Q4 2019, most likely in October, followed by another cut in mid-2020.”

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